Securities Law & Instruments

PDF Version

PDF Version


CSA Staff Notice 23-321
Order Protection Rule: Market Share Threshold for the period
April 1, 2018 to March 31, 2019



January 25, 2018

Introduction

On June 20, 2016, the Canadian Securities Administrators (the CSA or we) published a notice{1} (the 2016 Notice) regarding the implementation of the market share threshold. This notice updates the list of protected and unprotected marketplaces published on January 30, 2017. The updated list will be in effect from April 1, 2018 to March 31, 2019. We note that there is no change from last year.

The text of this notice is available on the websites of the CSA jurisdictions, including:

www.lautorite.qc.ca
www.albertasecurities.com
www.bcsc.bc.ca
www.nssc.novascotia.ca
www.fcnb.ca
www.osc.gov.on.ca
www.fcaa.gov.sk.ca
www.msc.gov.mb.ca

Purpose

The purpose of this notice is to provide the list of marketplaces that display protected orders (protected marketplaces) and marketplaces whose orders will not be protected (unprotected marketplaces) for the purposes of National Instrument 23-101 Trading Rules (NI 23-101) and the order protection rule (OPR) for the period April 1, 2018 to March 31, 2019 because they do not:

(i) provide automated trading functionality as they have an intentional order processing delay, and/or

(ii) meet the market share threshold.

The market share threshold has been set at 2.5%.{2}

OPR Requirements

Section 6.1 of NI 23-101 requires marketplaces to establish, maintain and ensure compliance with policies and procedures that are reasonably designed to prevent trade-throughs of better priced protected bids and offers. Section 6.4 of NI 23-101 imposes the same requirement on marketplace participants that assume responsibility for compliance with OPR by entering directed-action orders.

Section 1.1 of NI 23-101 defines protected bids and offers as bids and offers displayed on a marketplace offering automated trading functionality, and about which information is provided to an information processor.

Section 1.1.2.1 of Companion Policy 23-101 Trading Rules outlines the circumstances in which a marketplace that introduced an intentional order processing delay would not be considered to be providing automated trading functionality. In those circumstances, the orders on that marketplace would not be protected.

Orders on "dark" marketplaces are not protected as they are not displayed. Therefore, orders on ICX, LiquidNet, MatchNow and Nasdaq CXD are unprotected for the purposes of OPR.{3}

List of Protected and Unprotected Marketplaces

Below we have listed the protected and unprotected marketplaces.

The orders displayed on the marketplaces listed in Table 1 below are protected because either the marketplace meets the market share threshold and/or the orders are for securities that are listed by and traded on that marketplace:

Table 1 -- Marketplaces that Display Protected Orders

Marketplace

Market Share

Status

Reason Protected

 

CSE

6.11

Protected

Meets market share threshold

 

Nasdaq CXC

12.46

Protected

Meets market share threshold

 

Nasdaq CX2

5.16

Protected

Meets market share threshold

 

OMEGA

5.26

Protected

Meets market share threshold

 

TSX

46.23

Protected

Meets market share threshold

 

TSX VENTURE

13.12

Protected

Meets market share threshold

 

AEQUITAS Lit Book

2.00

Protected for Aequitas-listed securities only

Exchange protected for its listed securities

Orders displayed on the marketplaces listed on Table 2 below will be unprotected because either the marketplace does not provide automated trading functionality, does not meet the market share threshold or does not display orders:

Table 2 -- Marketplaces whose Orders Are Unprotected

Marketplace

Market Share

Status

Reason Unprotected

 

AEQUITAS Neo Book

2.21

Unprotected

Does not provide automated trading functionality

 

ALPHA

7.16

Unprotected

Does not provide automated trading functionality

 

AEQUITAS Lit Book

2.00

Unprotected for securities other than Aequitas-listed securities

Does not meet market share threshold

 

LYNX

0.28

Unprotected

Does not meet market share threshold

 

ICX

 

Unprotected

Does not display orders

 

LIQUIDNET

 

Unprotected

Does not display orders

 

MATCHNOW

 

Unprotected

Does not display orders

 

Nasdaq CXD

 

Unprotected

Does not display orders

QUESTIONS

Please refer your questions to any of the following:

Alina Bazavan
Timothy Baikie
Senior Analyst, Market Regulation
Senior Legal Counsel, Market Regulation
Ontario Securities Commission
Ontario Securities Commission
<<abazavan@osc.gov.on.ca>>
<<tbaikie@osc.gov.on.ca>>
 
Roland Geiling
Sasha Cekerevac
Derivatives Product Analyst
Regulatory Analyst, Market Regulation
Direction des bourses et des OAR
Alberta Securities Commission
Autorité des marchés financiers
<<sasha.cekerevac@asc.ca>>
<<Roland.Geiling@lautorite.qc.ca>>
 
Bruce Sinclair
Securities Market Specialist
British Columbia Securities Commission
<<bsinclair@bcsc.bc.ca>>

{1} CSA Staff Notice 23-316 Order Protection Rule: Implementation of the Market Share Threshold and Amendments to Companion Policy 23-101 Trading Rules.

{2} CSA Staff Notice 23-316 includes a description of the calculation of the market share threshold.

{3} Orders on the Aequitas Dark book will also be unprotected after this book is launched.